UM Prof Gets “F” for Intellectual Dishonesty in U.S. Trade Policy Debate

(Chuck Muth) – In a column published by the American Enterprise Institute on August 7, University of Michigan Prof. Mark J. Perry criticized “the wasteful ‘rent-seeking’ (lobbying) that takes place on behalf of domestic industries seeking protection from foreign competition via protectionist trade policies.”

Just as the issue is “illegal” immigration, not just immigration, this issue is about “unfair” foreign competition, not just foreign competition.  And by unfair, we’re talking about foreign governments that subsidize various industries which give them an unfair competitive advantage over American producers that do not get similar government hand-outs.

Anyway, to buck up his disingenuous argument, Prof. Perry resurrected Big Candy’s favorite boogey man, the U.S. sugar program…

“The US has a long history of trade protectionism for American sugar producers in the form of tariffs and import restrictions on low-cost foreign-produced sugar that raises US sugar prices to about two times the world price. Currently, the world price of sugar quoted for futures contracts is less than 15 cents per pound compared to the domestic price of more than 25 cents. But when you’re an ongoing enterprise that continually engages in ‘legal plunder’ from the American consumer to the tune of billions of dollars per year you have to devote significant resources to protecting your coveted position of being insulated from competition from more efficient foreign rivals.”

First of all, the world price of sugar can be quite volatile.  It goes up, it comes down.  Sometimes dramatically.  Meanwhile, the cost of American sugar today is pretty much exactly what the cost of American sugar was 30 years ago.  That’s called “stability.”

Secondly, the 15-cent figure does NOT include shipping.  And since foreign sugar doesn’t get free shipping through Amazon Prime, Prof. Perry is not comparing apples to apples as far as the end cost to consumers goes.

Lastly, the difference between foreign and domestic prices isn’t because our foreign rivals are “more efficient.”  It’s actually because they receive government subsidies; subsidies that are necessary, in part, because foreign producers are actually far LESS efficient that American producers.

That means foreign sugar is artificially low, not that American sugar is artificially high.  And that’s the difference between fair trade and free trade.

As Commerce Secretary Wilbur Ross declared in a Wall Street Journal op-ed a week ago, “Defending U.S. workers and businesses against this onslaught (of unfair foreign trade practices) should not be mislabeled as protectionism.”

Someone please get that memo to Prof. Perry.